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How to save and budget for the cost of having a family
It has recently been revealed that the cost of raising a child is just under £220,000 from birth to age 21. Costs usually rise year on year, with ages 18 to 21 being the most expensive due to education costs.
Like most other big changes in your life, having a family is an expensive decision as has been proven time and time again. Saving as much as possible and budgeting for the inevitable financial changes is the best way to prepare for this next chapter of your life.
If you are struggling with debt or are just worried about the costs of having a family, we have put together some tips for you to consider that should help your situation. However, for further help and advice, you should contact an independent financial advisor (IFA) to discuss your situation with them.
Talk to your boss about maternity and paternity pay/leave
You should be aware of how having a child will affect yours/your partner’s pay as your salary will usually decrease the longer you are on maternity leave. The best thing to do is figure out what money you will have, who should take time off and if you will go back to work after having a child or not.
Work out your budget, based on your reduced salaries
Work out a budget taking into account bills, income, debt repayments and any other spending. This will give you the most in-depth look at your household finances to know exactly what goes in and out each month. By working out a budget on a reduced salary, it will give you a more realistic outlook of your finances when you are on maternity/paternity leave.
Learn to live on only one salary, if you can
If one party decides not to go back to work after their leave has finished, you should prepare for the drop in income. Alternatively, if both parties decide to return to work, you should budget for childcare costs. Scaling back and living on basics will help you to manage and save money as a household.
See where can cut costs
The budget you have created should be in-depth, as a result you’ll be able to see where you can cut costs. Maybe you could stop buying new clothes for a while, cut back on the expensive TV package or simply switch energy providers. Every little bit of money you can save before starting your family will help in the long run.
Pay off your debts
This is something that is important whatever your situation but it is particularly important before starting a family. Debt repayments take money away from paying for essentials for your household and family. Paying off or paying down credit cards and loans before this life change cuts a monthly outgoing and cost that can go elsewhere.
Sell what you don’t need
Do you have a music instrument lying around you’ve never played? Have CD’s/DVD’s cluttering up shelf space? An overflowing wardrobe? Then, sort through the clutter and sell what you can. By parting with the unnecessary, it will give you more space. Sell at car boot sales or online to make extra cash to put in savings or to pay off debts.
Create a savings plan
If you can, figure out how much money you need for certain purchases or to put aside for maternity leave, this will give you something to aim towards. Open a savings account and set up a monthly standing order for that account. This is the best way to make sure you are adding to your savings regularly.
Remember, you don’t have to buy everything brand new
As exciting as it is to buy everything you need brand new, it is not affordable for many. Buying second hand, using sites like Gumtree and eBay or taking hand-me-downs from friends/family is a great way to get what you need and save a lot of money. Prams, car seats, cots and baby clothes are expensive purchases by buying second hand, you could save yourself plenty.
Get insurance and write a will
These may not help you save money but they are very important. If you don’t already have life insurance, you should get some to cover you and your family; if you do have insurance, review it to include your latest family addition. See an independent financial advisor (IFA) before making insurance changes and make sure you write a will as well. Many people want to avoid doing this for as long as possible but it is important should the inevitable happen. It will make sure your family is protected to receive monies and possessions that will secure their future.
Look into the benefits you may be entitled to
For the duration of your pregnancy, you’re entitled to free dental appointments and NHS prescriptions (these remain free for the first year after birth). Make sure you get Maternity Exemption Certificate from your doctor or midwife, signed by them, to help claim these.
Other benefits you are entitled to once you have a child include: Child Benefit, Child Tax Credits, Healthy Start Food Vouchers, Sure Start Maternity Grant, Working Tax Credit, Shared Parental Leave and more. Many are based on your income as to whether you will be successful in your application. However, you should look into benefits and apply for all you’re entitled to, to help you and your child financially.
There are many things to take into account when you are planning to start a family. Being on top of your budget is a good way to make this process easier. All these tips should help you to save and budget for the expense and costs of having a family.